EU ministers agree to boost tax on cigarettes

BRUSSELS (Reuters) - European Union states on Tuesday agreed to raise the excise tax on cigarettes by nearly 30 percent to try to reduce smoking and improve public health, a move that could hurt tobacco manufacturers.

The agreement is part of the EU's drive to combat smoking, which British statistics show kills more than one million men and 200,000 women in Europe each year.

"The directive is intended to ensure a higher level of public health protection by raising minimum excise duties on cigarettes," the EU said in a statement.

The tax rises, agreed to by finance ministers at talks in Brussels, will start in 2014 for most of the EU's 27 members.

The minimum excise tax will be raised from 64 euros to 90 per 1,000 cigarettes, and should be no lower that 60 percent of the sale price. The current level is no lower than 57 percent of the sale price.

Bulgaria, Greece, Estonia, Latvia, Lithuania, Hungary, Poland and Romania, which have traditionally had lower cigarette prices than the rest of the EU, will be allowed to delay the new minimum tax until 2018, an EU diplomat said.

The tax changes could close the differences in cigarette prices across the EU, which range from about 1 euro ($1.50) per pack in Latvia to more than 6 euros in Ireland.

Cigarette manufacturers, such as Philip Morris or Reynolds American, can expect to feel the effects of the decision. Past increases have typically hurt sales of cigarettes by prompting smokers to give up the habit.

Figures from 2006 showed that about 25 percent of the EU's near 500 million people smoke and the number is declining steadily.

However, another outcome of the decision could be to a rise in the smuggling of cheap cigarettes from countries outside the European Union, such as Ukraine, Russia and African nations, a industry that has grown rapidly over the past decade thanks to mafia involvement, industry experts said.